Good times, bad times, and the growing income gap

"We have reached a tipping point,” the secretary-general of the OECD said in 2015. “Inequality can no longer be treated as an afterthought. We need to focus the debate on how the benefits of growth are distributed.” This growing international consensus has been reflected in the creation of the OECD’s Centre for Opportunity and Equality, along with a new focus on inequality at the International Monetary Fund and the World Bank.

Here in Australia, there’s less unanimity. Shadow assistant treasurer Andrew Leigh has highlighted how the richest Australians have taken a rising share of overall income since around 1980, and the newly elected national president of the Labor Party, Wayne Swan, wants to see a renewed effort to reverse that trend. Yet treasurer Scott Morrison says inequality is falling rather than rising.

Part of the disagreement comes down to the question of what we are measuring and over which period. In the decade since the global financial crisis, income inequality in Australia has remained stable or even fallen slightly, but that fall came off a historic high for inequality. There is little doubt that inequality is worse now than it was in the early 1980s. As the IMF reported in its Fiscal Monitor for 2017, “Australia is among countries with the highest growth in income inequality in the world over the past thirty years.”